|Debt Free Direct Group
||EPS - Basic
||Market Cap (m)
Real-Time news about Debt Free Dir. (London Stock Exchange): 0 recent articles
|twentyoneeleven: Peace Breaks Out In The IVA Sector...
Dealing with dodgy debt
Created: 8 January 2008
Written by: Jonas Crosland
A truce has been called between leading lenders and providers of individual voluntary arrangements (IVAs) that should mark an end to the bitter acrimony that plagued insolvency practitioners for much of last year.
While IVAs have only recently become a subject of serious contention, they have actually been around for some time - they were introduced in 1986 as part of the Insolvency Act, primarily for use by small businesses. An IVA is an agreement between an overburdened debtor and his or her creditors to repay a fixed monthly amount for five years. In return, all interest charges are suspended and creditors agree not to pursue any further claims on the money outstanding. The amount repaid can be as little as 25 per cent of the outstanding amount. This may sound like a raw deal for creditors but it is better than making someone bankrupt, which is not only a costly process but carries with it the prospect of getting back no money at all. However, after two decades, lenders began to feel the rules of the game needed some changing.
So, following a year at loggerheads, IVA providers, working as insolvency practitioners (IPs) and represented by the Debt Resolution Forum, have thrashed out an agreement with the credit industry, represented by the British Bankers' Association . The deal incorporates a new fee structure and sets industry standards for advertising, advice, information and documentation. And with the big high street banks signing up, IVA providers can at last start to look forward to more visible revenue streams, although the business will be done on much less favourable terms.
The new fee structure is not yet set in stone, but the broad principle is that instead of receiving an upfront commission, IPs will now earn their income from the first four or five months of contributions made by a debtor. Clearly, this provides an incentive to ensure that debtors can meet their agreed payments while also encouraging IPs to make sure they repay as much as possible..
Before the new agreement, a new IVA was worth around £2,700 to an IP, plus a monthly management fee of £78, giving a total income per IVA of about £7,400. Based on the new system, IPs are now likely to receive about a third as much income per IVA from an the average-sized problem debt. Still, creditors and debtors as well as IVA providers had been happy with the old way of doing things until it became clear that some unscrupulous operators were pushing individuals into inappropriate IVAs and taking their commission up front. In many cases, once the IPs had pocketed their cash, debtors failed to maintain payments forcing banks to write off increasing amounts of bad debt. This had the unpleasant side-effect of highlighting just how sloppy their lending criteria had been in the first place. So, last year, creditors put their foot down.
Without the approval of 75 per cent of the creditors, an application for an IVA will fail. This was painful all round, but hit the legitimate IVA providers the hardest. Accuma , for example, saw its share price plummet by 92 per cent to just 21p at one stage. All this came at a time when margins were already being squeezed by increased advertising costs and a sharp rise in the number of IP firms, to over 600. Obviously, the situation could not be left unresolved, but it has taken a year of negotiations for the truce to be declared.
It looks like this could have come in the nick of time. Accountancy firm Grant Thornton is predicting that personal insolvencies will jump this year to 120,000, almost triple the amount in 2004, and the average owed by problem debtors has now hit £30,000. So the potential increase in demand could mitigate some of the pressure the new fee arrangement will put on margins.
Indeed, after the UK's annual Christmas spending binge, like anything else taken to excess, there is usually a hangover. And for many consumers this really starts to set in when bills begin to land on the doormat in January. In fact, the frenzied spending of someone else's money has now reached the stage where consumer debt is greater than the value of the UK's annual gross domestic product (GDP), and current estimates suggest that over 9m credit-card holders are struggling to keep up with their payments. What's more, there is evidence to suggest that over 4m people are still paying off debts from Christmas 2006.
In previous years, extended credit facilities and the ability to pay off debt by remortgaging the house effectively put off the evil day when loans had to be repaid. But neither of these options is now on the table. Credit card companies are cutting borrowing limits and applying much tougher lending criteria, while stagnating house prices have severely curtailed the ability to remortgage. And it gets worse. Around 1.4m homes face mortgage repayment increases of up to £200 a month when fixed-rate deals taken out two years ago come to an end, due to interest rate rises over the past two years. Add to that the spiralling cost of gas, electricity and petrol, and the picture is pretty gloomy. A vast majority of people in debt will get by with a bit of time-honoured belt-tightening, but for some it is already too late. So, having taken the pain of the new fee structure, IPs will now be rubbing their hands.|
|diogenesj: It's certainly a very interesting development, Sat, and should put a floor under the share price. Hanover v. Cawkie: I wonder which has deeper pockets and which has done more thorough research. :-)|
|sat69: JB...Info as requested
Debt Free Direct Group PLC
26 June 2007
DEBT FREE DIRECT GROUP PLC
("Debt Free Direct", the "Company" or the "Group")
Acquisition of Clear Start UK Limited ("Clear Start") (the "Acquisition")
- Initial consideration satisfied by the issue of 4,159,671 new ordinary
- Initial consideration values Clear Start at approximately #10.9 million
- Deferred consideration of up to a further 2,229,482 new ordinary shares
dependent on share price performance of Debt Free Direct over next two
- Acquisition is expected to be earnings enhancing
- Clear Start vendors (the "Vendors") to nominate two board members
Rationale for enlarged group
- Clear Start is a rapidly-growing consumer debt advice and solutions company
o A strong management team with a background in financial
o Top ten IVA volumes through proprietary online and referral
o Industry-recognised creditor relationships and innovative
- The directors of the Group (the "Directors") believe that the enlarged
group will be clear market leaders in the IVA space, and will move quickly
in a consolidating market to broaden the range of products and services it
- Proposed share buyback of up to 4,500,000 shares
- Proposal is to buy back shares up to the number of shares issued as
consideration in order to maximise the accretive earnings impact of the
Acquisition, whilst ensuring that the Vendors' interests are aligned with
other Debt Free Direct shareholders
- Share buyback to be funded by proposed new debt facility of approximately
- Shareholder approval will be required to authorise the Company to purchase
its own shares and to cancel the Company's share premium account in order
to effect the share buyback programme
Extraordinary General Meeting
- An Extraordinary General Meeting ("EGM") of the Company will be convened
for 18 July 2007, to consider the resolutions necessary to effect the
proposed share buyback|
|alexx: The problem with the share price is not the results but the prospects surely, as had been stated above several times|
|g1ll1s: sat, well I didn't spot anything....did you, share price still increasing four days in a row.......nice!|
Like you, I have no idea, just offering possibilities.
However, if the 2008 forecast is not easily achievable, there seems little need to comment positively again unless they are trying to support the share price.
They claim the high ground on their modus operandi for customers and I see little need to think they are doing anything untoward here.
At this stage, I suggest benefit-of- doubt and hope they avoid trying to satisfy the brokers.|
|ddav: From WWW.THEWRONGPRICE.COM
Friday's profit warnings from Accuma Group and Debt Free Direct caused wholesale panic among investors in AIM's IVA (Individual Voluntary Arrangement) sector. Accuma blamed a poorly executed marketing strategy on its own part for slower than expected growth in the first half of its financial year, but its complaint of increased resistance among 'a small minority of creditors... impacting IVA approval rates' helped to cause share price falls across the board for AIM's other IVA arrangers.
After the market closed on Friday, Debt Free Direct revealed that increased competitor advertising had reduced response rates from potential IVA clients in November, December and January. Consequently, it warned that the final quarter of its 2007 financial year (which ends in April) would be challenging. However, the company was dismissive of recent 'creditor posturing', and indicated its belief that peace will break out with creditors over the coming months. Debt Free Direct still expects that profitability in 2008 will be comfortably in line with current market expectations.
The weekend business press (rather predictably) had a field day, and warned that tougher rules for the IVA sector would be forthcoming that would put further pressure on profits.
However, on Monday morning, debts.co.uk which joined AIM last summer released a statement in which it reported that first-half trading had been up to its best expectations and in line with market forecasts. Soon afterwards, Debtmatters itself announced that its IVA and loan broking businesses are trading in line with market expectations.
Clearly not every IVA arranger is feeling the pinch, and even Debt Free Direct seems to be indicating that current problems are mainly of a temporary nature. But Debtmatters' reassurance means that the earnings per share estimate for the year to 31 March of 23.1p can be relied upon, and this means that its shares are currently trading on a multiple of less than eight times prospective earnings! In our opinion, this is an ideal buying opportunity. Buy.|
|kristini2: Citywire-broker Keefe today rates DFD a buy with price target of £5.00!
That price would be a near £200m market cap and DFD are going to be 'challenged' to hit this year's profit target. One broker had a target of £11.9m. That produces some PE ratio for a company in a market that appears to be going ex growth and with some uncertainty.
I assume thees brokers know more than me so what am I missing. It is safe to bet that DFD are not going to hit £11.9m and with all the uncertainty why should the rating be more than 8X assume revised estimated profits (let's project £8m.) An approx £64m market cap provides a share price of around £174.00 at best.
The share price could bounce short term, especially with all the broker buys out today.
|mr kingsley2: Although the share price has dropped today on negative publicity and possible competition which i believe will have a minimal effect if any on the profits and growth of dfd,they today have a half page advert for job vacancies in the Lancs Evening Post due to the rise in business they are experiencing.Things will blow over and it will be a case of the weak will go under and the strong shall prevail.I will class this as a buying opportunity and wait for the slow rise back to nearer £6-00.|
|via con: SMALLER COMPANIES UK: DFD is poised for global expansion
By Roger Blitz
Debt Free Direct will move into Australia by the end of the year and sees
potential markets for the debt administration and advice business in Canada, the
US, South Africa and Hong Kong.
The new venture comes on top of final results showing pre-tax profit at £4.8m in
the year to April 30, up from £1.5m the previous year.
Andrew Redmond, chief executive, said the working capital for the Australian
venture would be up to £400,000, which will be spent on advertising and 25
"The costs are not significant," Mr Redmond said. "Most of the things Australia
require we develop here. All our advertisingand systems will work in Australia."
Shares closed down 9½p at 452p yesterday, valuing the company at £168.6m.
DFD specialises in Individual Voluntary Agreements, under which creditors agree
to accept 70 per cent of an individual's debt in interest-free monthly payments.
Creditors then agree to pay some or all of the balance of the debt in a fee to
DFD has a 20 per cent share of the UK market and processed 20,000 IVAs last year
compared with 11,000 the year before.
Mr Redmond said the Australian language and culture, as well as its serious
consumer debt problem, and a debt solution system similar to IVA made the market
viable for DFD.
"In the long term, we would want to prove the model in Australia," Mr Redmond
added. "The markets that have the right dynamics include Canada, the US, South
Africa and Hong Kong. But I doubt we will develop all of these and have the
right economic circumstances at the right time."
Advertising spending rose from £2.4m to £3.3m and staff numbers are up from 152
Turnover rose 93 per cent to £16.2m and earnings per share jumped from 3.04p to
8.79p. The final dividend was 1.5p, making a total of 3p.
*An 80 per cent rise in the share price in the past six months demonstrates the
rise of DFD. Its advertising-led strategy is working wonders, though quite how
long they will enjoy this level of growth is uncertain. At least one competitor
is looking to replicate their accounting, advice and case management system but
DFD has invested £1m on its bespoke system. The stock trades at 25.8 times
forward p/e, falling to 16 times in 2008, and the growth potential of the
company is strong.|
Debt Free Direct share price data is direct from the London Stock Exchange